Political markets betting on Thune

He barely registers in polls, but there’s a lot of smart money betting on Sen. John Thune for Republican presidential nominee in 2012.

In a Quinnipiac University poll out Monday, just 2 percent of likely Republican voters said they support the South Dakota senator. That places him at the bottom of the field, tied for seventh place with Mississippi Gov. Haley Barbour. A Gallup Poll earlier in November had Thune in eighth place, also with 2 percent.

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But on two of the three major political exchanges — markets in which users bet on or buy stocklike futures contracts for candidates they think will win the GOP nomination — Thune ranks third, behind only Mitt Romney and Sarah Palin. Investors think he’s almost twice as likely to win it as the fourth-place contender, former Arkansas Gov. Mike Huckabee.

Not bad for a largely unknown small-state legislator just finishing his first term.

“Polls reflect the current state of knowledge of the electorate, where things like name recognition are a huge issue. But there are people you feel will run a strong campaign, and name recognition won’t be a problem come 2012, so it’s not uncommon to see a very large divergence a long way out between polls and markets,” said Justin Wolfers, an economist at the University of Pennsylvania’s Wharton School of Business who has extensively studied political markets.

While his nationwide name recognition is low and he lacks the executive experience of many of his prospective presidential competitors, Thune benefits from a reservoir of goodwill among Republicans who fondly remember his victory over Senate Minority Leader Tom Daschle in 2004, the first time in more than a half-century that a Senate leader lost reelection.

“Thune is young, good-looking, politically successful, managed to defeat an incumbent Democratic minority leader, looks like a giant killer,” said Dennis Goldford, a political scientist at Drake University in Des Moines, Iowa.

Thune has another advantage that some think may appeal to speculators who aren’t as plugged in to Washington: He looks like a president.

“There is a whole body of literature that says snap judgments matter,” Wolfers said. “If you show people 30-second clips of candidates with the volume off on TV, you can do a better job forecasting the outcome than you can if you know the state of the economy. Looking presidential is important.”

But there could be another reason to explain Thune’s third-place spot: The other candidates at the top of the very crowded field have been on the scene longer, and their flaws are better known.

“I suspect that Thune ranks as highly as he does because many knowledgeable observers are not convinced that the more established candidates can sustain a winning message and take the nomination,” said the University of Missouri’s Peverill Squire, a former University of Iowa political scientist who closely followed the school’s electronic market. “Thune is untested on the national stage, but he is an attractive candidate with no known warts. I think he represents a ‘rest-of-the-field’ wager, a bet many observers are willing to make at the moment.”

There are two major exchanges where informed users can buy presidential candidate futures: Intrade, based in Dublin, and the Iowa Electronic Markets, an online market operated by the University of Iowa in which contract payoffs are based on real-world events such as political outcomes. On Betfair, a London-based company that primarily deals with sports betting and casino games, users can bet on who will win.